Illinois State General Assembly Representative Daniel Beiser (D-111th) has introduced legislation that would amend the Illinois Little Miller Act to require sureties participating in state projects be rated "A" or better by A.M. Best. As currently written, the bond is required to be delivered from “good and sufficient sureties.”
Illinois HB 4769 would add the following requirement:
“The surety on the bond shall be a company that has a certificate of authority from the Department of Insurance specifically authorizing it to execute surety bonds and the company shall have a financial strength rating of at least A as rated by A.M. Best Company Inc. or a similar rating agency."
In response,
NASBP sent a letter to the bill's sponsor expressing opposition to the bill. NASBP finds that this additional requirement is troubling for three reasons. First, sureties are already required to be licensed by the state’s insurance department, which looks at a surety’s rating, amongst other things, when determining whether to license the surety in the state. Requiring an "A" or better rating would drastically limit competition throughout the state. Only a handful of sureties possess an "A" rating and those contractors that have built bonding capacity with a surety rated "A-" would not be able to participate in state projects; Limiting competition risks driving up total project costs.
Secondly, a rating of "A-" is still an “excellent” rating and
according to A.M. Best is only “assigned to companies that have, in our opinion, an excellent ability to meet their ongoing insurance obligations.”
Lastly, excluding sureties that are rated "A-" from participation in state work would not be advantageous to the construction industry and may have a disparate effect on small and disadvantaged businesses, thus inhibiting the state’s ability to meet minority and disadvantaged contracting goals. Many of these contractors will not be able to receive surety credit from "A" rated sureties and, as a result, would also be excluded from state projects.
States rarely attempt to codify a credit rating. NASBP has opposed similar legislation focusing on a specific project. The impetus behind this Illinois legislation is not yet known. NASBP will continue to track this legislation and to provide the membership with updates as we receive them. For more information, contact Shannon Crawford, Manager of State Relations at
scrawford@nasbp.org.